I do not own any shares of Michaels but boy do I ever know the aisles of merchandise as I have spent many a trip looking for yarn, styrofoam, or other materials for school projects. Anyhow, Michaels is having a nice day today trading at $43.01 up $3.58 or 9.08% on the day as I write.
According to money.cnn.com MIK "...owns and operates 770 Michaels stores and 153 Aaron Brothers stores, which feature art products and home decor items. It also operates Star Wholesale, a wholesaler, and Artistree, a framer."
Michaels reported their second quarter results yesterday which were strong if not stellar. Total sales for the quarter increased 7% to $616.5 million compared to $576.6 million for the same period last year. Same-sales were up 1% for the quarter and 2% for the six months. I much prefer same store sales growth in the 5-10% range as we have seen with some other retail ventures we have examined her like Walgreen (WAG) or Chicos Fas (CHS). However, all of the other numbers are in line so let's take a look at this company a little further.
Morningstar.com shows a steady increase in revenue with $1.57 in revenues in 1999, $1.88 billion in 2000, $2.25 billion in 2001, $2.53 billion in 2002, and $2.86 billion in 2003. Although not spectacular growth rates, this company is still doing quite well in growing its sales figures.
Their free cash flow has been a little more unsteady with $29 million reported in 2001, $49 million in 2002, $1 million in 2003, but $60 million in the trailing twelve months.
Looking at Assets/Liabilities on Morningstar.com we find the company quite solvent at least on superficial review of the numbers with $211 million in cash reported as well as $899.1 million in other current assets, quite enough to cover the $337 million in current liabilities and $253 million in long-term liabilities.
Looking at Yahoo.com we find that this stock is a relatively large cap issue with $2.63 Billion in market capitalization. There are 66.6 million shares outstanding with 62.7 million of them that float. The company DOES pay a small dividend with $.40 estimated annual pay-out representing a 1.01% yield. (This may add some price stability to the stock (?)) The price/earnings on this company is reasonable at 18.1 and the price/sales ratio, a new ratio that I am starting to pay closer attention to in terms of valuations especially of retail firms, is a very reasonable 0.94. There are lots of shares out there that are short as of 8/8/03, with 2.43 million shares reported short...representing 3.9% ot the float or 4.85 days of average trading. This is a bullish indicator for this stock.
This is a reasonably priced, one could say I suppose, a value investment in terms of valuation as well as a growth investment in terms of consistency of earnings and revenue growth. While not my personal favorite in retail, if you are a Peter Lynch kind of investor, and find, like I do, that your kids are dragging you to Michaels where you are dropping lots of cash....maybe this is a stock for you!
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